Report: Medicare wastes millions

By KATRINA WOZNICKI, UPI Science News  |  June 12, 2002 at 5:07 PM
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WASHINGTON, June 12 (UPI) -- Medicare officials were placed in the hot seat before senators Wednesday, facing questions about a government report that the federal healthcare program for seniors wastes nearly $1 billion a year by paying too much for certain medical supplies.

Sen. Tom Harkin, D-Iowa, requested the report, prepared by the Department of Health and Human Services Office of Inspector General. It compared what Medicare spent for 16 medical items with similar expenditures by the Veterans Administration. If Medicare had paid what the VA paid, the report stated, it would have saved $958 million or 56 percent.

At a hearing on the report, by his Appropriations subcommittee on labor, health and human services and education, Harkin held up a box of blood glucose test strips, used by diabetes patients to test blood sugar levels. Medicare, Harkin said, paid $38.32 for 50 of the strips, while the VA paid $19.50. Harkin said he sent one of his aides to Costco, the retail superstore, where the aide was able to purchase 100 test strips for $70, including free lancets.

"The American people are being taken to the cleaners," Harkin said. "It's is absolutely unconscionable that Medicare pays prices that are up to eight times as much as the VA is paying for the exact same supplies. Every American should be deeply disturbed by the findings of this report."

The report looked at Medicare expenditures on walkers, saline solution, enteral feeding supply kits, wheelchairs, nebulizers, pressure pads with alternating pumps, and lancets, among other items. Results showed Medicare consistently overpaid for identical items purchased by the VA for significantly less.

For example, the VA spent $1.02 for about 1 quart of saline solution, compared to $8.68 by Medicare. The VA spent $127.72 for a standard wheelchair while Medicare paid $570.68. An intravenous pole cost the VA $50.25, but Medicare spent $142.45.

Harkin said it is long overdue that Medicare begin practicing competitive bidding with medical suppliers to stop wasting taxpayer money.

Some experts in Medicare matters did not share Harkin's outrage. Nancy-Ann DeParle, senior adviser to J.P. Morgan Partners in Washington and a health policy consultant, told United Press International the situation with Medicare is far more complex than it is with the VA.

"Every price that Medicare pays is legislated by statute, which makes it very hard if Congress has to change a law for Medicare to be flexible and adept," DeParle said.

Medicare serves 40 million beneficiaries, which makes it much larger than the VA, noted DeParle, who was administrator of the Health Care Financing Administration during the Clinton presidency. "Remember that if Medicare pays a rock-bottom price, that means ... providers and suppliers -- if Medicare is a big part of their market -- (will) make a much lower profit, so there are issues there, whether that's appropriate."

Marilyn Moon, a senior fellow at The Urban Institute in Washington and a health care specialist, said, "When you talk about competitive bidding and competition and so forth, that sounds good until some congressperson realizes there's a major medical supplier in their district and they lose their enthusiasm very quickly."

The VA can get away with lower prices, Moon told UPI, because they are so much smaller than Medicare. "(Suppliers) can cut a deal with the VA and still not affect most of their business." With Medicare, however, it becomes much more difficult for medical equipment suppliers to demand discounts."

Moon said there is serious discussion in Congress right now about removing statutory restrictions on competitive bidding for Medicare purchases.

Sen. Arlen Specter, R-Penn., noting prescription drugs for Medicare recipients is one of the top priorities facing Congress, said such a program could become more of a reality if Medicare could cut waste, thereby freeing more money for such a program. "You pick up a billion here and a billion there," Specter said, "and pretty soon you've got enough for prescription drugs."

The Center for Medicare and Medicare Services also came under fire for not exercising more authority and stronger purchasing power with medical suppliers. Leslie Aronovitz, director of the Health Care Program Administration and Integrity Issues at the General Accounting Office, told senators Medicare lacks the information and technological infrastructure to maintain and update data to keep current on the latest on medical supply prices. "You can see why Medicare has difficulty keeping pace with market changes," Aronovitz said.

Aronovitz added without such an infrastructure, Medicare is unable to track accurately what it spends on medical supplies. "Clearly CMS needs to have much better information on what it's paying for and what it should be paying for," Aronovitz said.

Tom Scully, the CMS administrator, said Congress needs to recognize Medicare does not operate the same way as the VA does. The agency has more flexibility with its purchasing power, he said.

Harkin questioned that logic, asking Scully several times why Medicare does not simply purchase its supplies from the VA, since the VA gets the better deals by conducting competitive bidding with medical suppliers.

Although Scully concurred that CMS needs to be doing a much better job at getting medical equipment for lower prices, he cautioned the subcommittee against expecting Medicare to achieve the same level of savings as the VA. "I just don't want to raise the bar so high," he said.

Scully added there is concern aggressive shopping for cheaper medical supplies could lead "to a blow-up in the market." For example, if Medicare conducted competitive bidding and found a supplier for a type of medical equipment, that supplier could eventually wipe out competitors, enabling it to mark-up prices as soon as it regained control of the market.

Competitive bidding in rural areas also might not be appropriate, Scully explained, because there might be only one supplier that makes a particular piece of equipment Medicare needs.

Harkin said although Medicare might not always be able to get the best deals around, "I find it hard to believe that for these items, you can't get the same price as the VA." Harkin said some form of Medicare legislation is expected later this year and he wants to see action taken as soon as possible to cut down overspending on medical supplies. "We've jumped through every hoop," he said.

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